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To regard the cost of an improvement or other purchase as a capital asset for purposes of determining Income Tax liability. To calculate the net worth upon which an investment is based. To issue company stocks or bonds to finance an investment.

The owner of a business may capitalize the expense of renovating a factory to maximize his or her after-tax profits, since such expenses may be used to decrease the pretax profits, thereby reducing the amount of profits subject to taxation.

An individual may compute the net worth of shares of stock, in order to treat them as capital assets for income tax purposes. Such treatment often results in more favorable rates of taxation on the profits made when assets are sold because they are considered capital gains.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
References in periodicals archive ?
Determining whether a taxpayer is capitalizing a particular cost under Sec.
However, in three at least, capitalizing the pronoun was presented as optional.
As I expected, the Stylebook called for capitalizing internet, but its definition of the word seemed to favor my interpretation: "A decentralized network of host computers that are linked by high-speed lines."
Thus, capitalizing interest to a long-term contract will have a measurable impact on taxable income only where interest incurred fluctuates widely from year to year, though, typically this will not happen where a substantial portion of a business is devoted to U.S.
16 says entities that engage in purchase acquisitions may include certain associated costs in the acquisition price, thereby capitalizing the costs rather than deducting them from income as an expense in the current period.
The new final regulations on capitalizing intangibles clearly would not apply to the years at issue in Chief Industries; see Regs.
The procedures generally are consistent with the existing procedures for automatic accounting-method changes; however, following the issuance of an advance notice of proposed rulemaking on capitalizing costs incurred as to intangible assets (NPRM REG-125638-01, 1/24/02), some taxpayers changed to accounting methods provided in the final regulations without IRS consent.
1.263(a)-4(f)(vi), an accrual-method taxpayer must still wait until a liability is incurred before capitalizing or deducting prepayments.
1998), an appeals court held that a utility's change from capitalizing to expensing fuel costs did not represent a change in accounting method.
Presumably, the financial accounting standard of capitalizing these costs drew the Service's attention, as it provided a convenient argument and numeric support for applying these capitalization principles for tax purposes.
Taxpayers currently capitalizing ISO 9000-related costs, who want to change to the method described in Rev.
97-35 goes to great lengths to describe the Service's position on capitalizing and amortizing package design costs.